Within the past year, the Florida Supreme Court resolved conflicting decisions between Florida’s Fourth and Fifth District Courts of Appeal, as to whether a company’s referral service constituted a legitimate business interest supporting enforcement of a noncompete agreement. Additionally, the Court explored what is a “reasonable” standard in the context of a noncompete agreement or restrictive covenant under Florida Statute §542.335. While the Florida Supreme Court concluded that “referral sources” constituted legitimate business interests, this determination must be applied on a case by case basis.
A noncompete agreement is typically between an employer and an employee. An employee agrees not to compete against the employer’s business during the period of employment and afterwards. The agreement essentially prevents an employee from working in a delineated business and territory for a length of time following termination. Such agreements often include restrictions preventing an employee from soliciting customers from the business, work for certain competitors, and refraining from hiring employees from the former business. These agreements are often included in the purchase and sale of an ongoing business.
Florida has one of the most pro-employer noncompete statutes in the United States. Florida Statute §542.335, allows the enforcement of a noncompete agreement if the agreement is reasonable in duration, geographical area, and nature of business. According to the statue, a timeframe of one year or less is considered reasonable, but anything over three years is considered unreasonable. The party attempting to enforce the noncompete must establish that there is a legitimate business interest that supports the noncompete. The statute identifies five legitimate business interests that would qualify under the noncompete: trade secrets; substantial relationships with customers, confidential information; good will; and extraordinary or specialized training. Furthermore, the statute prevents a court from narrowly construing a noncompete agreement, and does not allow the court to consider any economic hardships that would fall upon an individual if the noncompete is upheld.
If you or anyone you know is subject to a noncompete agreement or restrictive covenant, or seeks to enforce such a provision, please contact the lawyers at Kahn & Resnik, P.L. Our lawyers proudly serve all of Florida and will fully represent your legal needs. Call us now at 954-321-0176 to set up a consultation.
